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The good times don't last forever, but neither do the bad. Much like the weather, these are the cycles that small business owners have little control over when they happen, yet must make the most of them as they occur. Although you don't have control over the timing, you do have control over the fundamentals of how you'll run your business and adapt to the challenges ahead. There's also an opportunity for you to grow during this period if you're able to make the right choices, take the appropriate action, and keep your eye on the things that matter most to the health of your small business. It was January 1985 and I was into my third full month of a being a young 23 year-old radio station manager when I received a call that would define the next 2 years. Our second biggest advertising account (a bank) had foreclosed on our largest advertising account (a farm implement dealership) with the assistance of the county sheriff, several chains and padlocks. I didn't know it at the time but we were about to enter what was to be known as the "farm crisis" and it was not a fun time to be in business in a small Iowa town. This was the baptism of fire that I was thrown into as a young inexperienced business manager. Many lessons and new skills were learned during that time along with others I acquired from the cycles that were yet to come. From those experiences, I'd like to share with you my "Survival Kit" to help you with the days ahead. 1) Protect Your Core Business: Now is the time to use solid business fundamentals. Direct all your efforts into doing what you're known for and for what you know best. New sales, new customers, and retaining base dollars from your core business customers will insulate you from the toughest of times. This will not be the time to branch out into an unknown area. For example, if you're an electrician and are known throughout the community as an electrician, this is not the time to focus your resources such as manpower and advertising dollars in an area such as "home theater installation" unless you have extensive experience and a wide, long-term demand for the service. This is not the time to react to "hunches", however it is the time to focus on the needs of your customers who make up your core business. If you don't know who your core business customers are and why they do business with you, you'll need to identify them quickly before your competition does and takes advantage of it at your expense. 2) Strengthen All Relationships: Strengthen relationships with your customers, vendors, and employees because these are the people that will help you get through the bad times. Find ways to recognize each for their contribution to your business and treat them like they're worth their weight in gold, because in good times and bad they are. The exception to this are the deadbeats, i.e. the people who don't pay you and consistently fail to keep the payment promises that they've made to you. 3) Cash is King: Keeping your cash flow steady is a daily fundamental which you cannot afford to fail in it's execution. Make sure your receivables are at a consistent level and that you're taking proactive action daily to keep it that way. Define your past-due collection policy and be faithful to it. Review your past-due accounts daily and take action to collect on past-due accounts as quickly as possible. Work with people who are keeping their past-due payment promises, and actively pursue means such as small claims court and collection agencies for those who break payment promises to you as they break them. You cannot afford to falter in this area if you are to be a survivor yourself. 4) Find New Ways of Doing Old Things Better: While it's not a time to venture away from your core business, it is the time to examine new ways of doing "the things we always do" especially in the areas of expense control and business efficiency. Perhaps you'll need to find a new vendor or bring something performed from the outside "in-house" to save expenses. Or maybe you'll need to "out-source" something which is consuming manpower hours so you can re-direct them on sales and your core business. Look for new vendors, new employees, new things, and new ideas to help you to stay efficient and to keep expenses under control. 5) Protect Advertising Repetition: One of the old adages of bad economic times is that "when business is bad, advertising is the first thing that's cut". That's understandable, but there is a right way to do it and a wrong way to do it. The wrong way is to cut every media across the board to the point where you no longer have any repetition in any media you buy. The right way to do it is to keep the mediums that either work the best, are the most efficient, or give you the most repetition for your dollar. To do this you will have to identify and keep those who do, and identify and completely cut out those who don't. For example, if print is too expensive for the repetition you're getting, don't just trim their budget because the result will be that you'll receive less repetition and page dominance which will make your investment even less effective. You may need to make the tough decision to cut them out completely and shift those dollars into another media where your message will dominate their audience or readership through advertising repetition. In other words, it's better to have two full glasses of water than 10 nearly empty glasses. If it's necessary to trim your advertising budget, don't skimp on the advertising repetition when you do. 6) Monitor Debt Service: The conventional wisdom for debt service during slow economic times is to get out quickly, and go in slowly. Keep an eye on your revolving credit and find ways to keep dollars in reserve. Acquire new debt only for things that will save you significant expense or on areas that will generate significant income. Beware of acquiring businesses or absorbing departments that have a spotty positive cash flow history or are inconsistent performers. 7) Look For The Fire Sales: The unfortunate reality is that not everyone will make it. If you're one of the good ones who have a healthy business you may be able to acquire distressed business properties for "pennies on the dollar" to add to your structure at the end of the economic contraction. This strategy is risky if you've never been through it before, so make sure you only use your "lazy money" and not your "lunch money" for new acquisitions. As the economy contracts, your ability as a small business owner to make the right choices and take the right action while seeking out new ideas may be the difference between whether you're open for another year, another quarter, or another day. If you do the right things, you not only have the opportunity to survive but to grow and prosper today and in the future.
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